TaxTMI 
TaxTMI 
2013 (3) TMI 13
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....wed capital which was debit balances existing in the names of directors and their family members, on the ground that no such dis-allowance was made by the assessing officer in the assessment year 1991-92 & 1992-93 while ignoring that the omission on the part of the assessing officer to add back the same in the preceding year will not preclude the assessing officer to add back the same on the basis material available on record. 2. Whether the learned Income Tax Appellate Tribunal was justified in deleting the dis-allowance of interest on borrowed capital by the assessing officer on the basis of material available on record merely because the same was not added back to the income of the assessee by the assessing officer in the preceding years. 3. Whether on the facts and in the circumstances of the cases, the ITAT was justified in confirming the order of the CIT (A) in allowing the interest of Rs.8,11,335/- claimed by the assessee on the borrowed funds even though there is strong evidence of linking these funds with withdrawals for non-business purposes. 4. Whether on the facts and in the circumstances of the cases, the ITAT was justified in holding that the heavy personal w....
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....irectors on the ground that no dis-allowance was made in the assessment year 19AFR91-92 & 1992-93 while placing reliance on its decision in the case of the assessee for the Assessment Years 1995-96 and 1996-97, ignoring the facts that the omission on the part of the Assessing Officer in particular years will alone not become ground for relief in a case where Assessing Officer has given concrete material to make the dis-allowance?. 2. Whether on the facts and in the circumstances of the case, the leaned ITAT was justified in confirming the order of CIT (Appeals) in allowing the interest of Rs.10,09,000/- claimed by the assessee on the borrowed funds even though there is evidence of linking; these funds with withdrawals for non-business purposes ? In all the Appeals, the facts and circumstances are identical. Hence, all these appeals are decided by this common judgment for the sake of convenience. In all the questions admitted by this Hon'ble Court, the issue is only one i.e. pertaining to interest free advances given to the family members and Director of the assessee company. Sri D. D. Chopra assisted by Sri Ghanshyam Chaudhary learned counsel for the appellant-departmen....
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....ly, he made a request to set aside the order passed by the Tribunal. On the other hand, Sri Ashish Bansal holding brief of Sri S. K. Garg, learned counsel for the assessee submits that the amount shown in the debit balance of the Directors and their relatives is an old amount and the issue had been examined by the authorities below for the earlier assessment year 1991-92 and 1992-93. Learned counsel further submits that up to 14.04.1983, the business was run by late Sri S. N. Sahu in his propriety set up in the name of "Sahu Theater". During his life time, there was heavy loss, so late Sri S. N. Sahu made the withdrawals from his business and on his death, debit balance in his capital amount was distributed amongst his legal heirs. After the death of late Sri S. N. Sahu, the business was taken over by partnership firm namely "Ms/ Sahu Enterprises" and the said debit balances were reflected in the name of legal heirs and family members in the balance sheet. In the year 1991-92, the business was taken over by the respondent company with all the assets and liabilities. Hence, these debit balances appeared in the balance sheet of the respondent-company. He further submits that....
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....hanged in subsequent years. In recent decision this Hon'ble Jurisdictional High Court in the case of CIT vs. M/s Goel Builders in judgment and order dated 24.05.2010, in ITA No.127 of 2005, after considering the various judgments available on this subject, has summarized the rule of consistency in the following manner:- "Law merges after considering various pronouncements of Hon'ble Supreme Court and other High Courts is that the principle of consistency is a rule in general but for cogent reasons or on justifiable ground, the revenue has got right to depart from its earlier practice and take a different view which shall be determined upon the facts and circumstances of each case. While departing from earlier practice, the revenue cannot act mechanically without applying its mind to earlier facts and circumstances under which a view was taken by the taxman and the facts and circumstances of the assessment year in question calling to depart from earlier view. Where there is a fundamental aspect permeating through different assessment years allowed by the authorities to sustain, it would not be appropriate to change the view in subsequent year except on justifiable ground like ....
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....business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency. Decisions relating to section 3 will also be applicable to section 36 (1) (iii) because in Section 37 also the expression used is "for the purpose of the business". "For the purpose of business" includes expenditure voluntarily incurred for commercial expediency, and it is immaterial if the third party also benefits thereby. ATHERTON (H.M. INSPECTOR OF TAXES) VS. BRITISH INSULATED AND HELSBY CABLES LTD. (1925) 10 TC 155 (HL), EASTERN INVESTMENTS LTD. VS. CIT (1951) 20 ITR 1 (SC); (1951) 21 COMP CAS 194 (SC) AND CIT VS. CHANDULAL KESHAVLAL AND CO. (1960) 38 ITR 601 (SC) FOLLOWED: The Expression "for the purpose of business" is wider in scope than the expression "for the purpose of earning profits". In the case of CIT vs. Malayalam Plantations Ltd. (1964) 53 ITR 140 SC and CIT vs. Birla Cotton Spinning and Weaving Mills Ltd. (1971) 82 ITR 166 (SC) it was observed that :- "To consider whether one should allow deduction under section 36(1)(iii) of interest paid by the assessee on amounts b....
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....e cases of Voltamp Transformers (P) Limited vs. CIT, 129 ITR 105 Guj ; and CIT vs. Walchand and Company (P) Limited, 65 ITR 381 SC where it was observed that yardstick will have to be taken from the businessman point of view but the businessman must be a prudent businessman. It may also be mentioned that corporate veil could be lifted to ascertain the true utilization of the borrowed funds as per the ratio laid down in the case of CIT vs. Indian Express Newspapers (P) Ltd.; 238 ITR 70 Madras. In the case of CIT vs. Motor General Finance Limited (2002) 254 ITR 449, it was observed that a finance company would not grant any interest free loan. Similarly, in the case of Saraya Sugar Mills (Pvt.) Limited vs. CIT (2000) 246 ITR 509, Hon'ble Allahabad High Court observed that part of interest paid to the Bank could be disallowed to the extent to which money had not been utilized for the purpose of business. The disallowance should be paid by calculating the amount of interest at the same rate at which interest was paid by the Company on the loans borrowed. In the case of CIT vs. Sujanni Textiles (P) Ltd.; (1997) 225 ITR 560 (Madras), the Madras High Court observed that interest paid....